France calls for report on tax-dodging by multinationals

French Culture Minister Aurelie Filippetti arrives for the traditional New Year government breakfast at the Inrerior Ministry in Paris January 3, 2013 before the first weekly cabinet meeting of the year.

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PARIS (Reuters) - The French government has asked for a report that will outline ways to stop multinational companies dodging taxes, a practice that indirectly stifles local companies, culture minister Aurelie Filippetti said.

European countries have been stepping up efforts to clamp down on companies, mostly from the United States, which minimize their tax bills by channeling profit through low-tax regimes.

"It is easy for very big globalised companies to set up their headquarters in Luxembourg or Ireland to escape paying company taxes or VAT (sales tax) and, as a result, offer unfair competition to companies that have physical sites and jobs in France," Filippetti told i>Tele television on Wednesday.

The report, expected this month, "will have proposals to fight against this bypassing of tax legislation," she said.

Her comments came as books-to-music retailer Virgin Megastore France prepared to file for insolvency on Wednesday, becoming the latest victim of a slump in CD and DVD sales as consumers buy more content online.

"Companies (like Virgin Megastore France) are facing a revolution and unfair competition as a result of large firms like Amazon (AMZN.O) that do not have the same tax rules as companies that are physically based in France," Filippetti said.

Amazon, which would not comment immediately on Wednesday, received a $252 million demand from French tax authorities at the end of last year for back taxes, interest and penalties in relation to "the allocation of income between foreign jurisdictions".

The internet retailer, set to open its fourth distribution centre in France employing 2,500 staff later this year, minimizes its tax bill in France and other European countries by channeling sales through Luxembourg which offers tax breaks to foreign companies based there.

Internet group Google (GOOG.O) is also under audit by the French tax authority about a structure which channels sales through Ireland.

Virgin Megastore France's collapse comes as high street woes intensify in the euro zone's second-biggest economy, where the jobless rate is at a 13-year high and shoppers are reining in spending.

The firm, which employs 1,000 people in its 26 Virgin-branded stores in France, including the flagship operation on the Champs-Elysees in Paris, met staff representatives earlier this week ahead of filing for insolvency.

Virgin Megastore France is owned by private equity firm Butler Capital Partners which bought a majority stake in 2007 from French media-to-aerospace group Lagardere (LAGA.PA), which itself bought the chain from founder Richard Branson in 2001.

"The government will be totally mobilized to help find a future buyer," Filippetti said.